MAGGIE PAGANO: Predators race to buy British firms on the cheap

Another day, yet another takeover. 

And once again the takeover frenzy for British companies is being led by foreign private equity houses with the latest approach for The Hut Group coming from the giant US firm Apollo.

Shares in the online retail tech company surged 44.9 per cent on the news that THG’s Matt Moulding – who is also its biggest shareholder – has received a preliminary approach.

The bid comes at an opportune time for Moulding who has been ordered by at least one big investor to get his house in order as THG is about to unveil even greater losses.

The firm is estimated to have lost £277million last year, taking total losses to more than £1billion over the last five years.

Takeover frenzy: So far this year, there have been 14 offers by private equity firms for UK companies

Takeover frenzy: So far this year, there have been 14 offers by private equity firms for UK companies

It is forecast to lose another £650million over next four years. That’s more of a mansion to get in order than a house.

So it is no surprise that going private is a serious option for Moulding, who has made no secret of his disillusionment with the London Stock Exchange.

Since Moulding floated THG three years ago for £5.4billion, the shares have collapsed, he has struggled with investor relations and governance issues and was forced to give up his golden share. 

Being out of the spotlight will certainly suit Moulding but may leave some original investors feeling sore.

That Apollo is gambling on turning around THG’s online platform is interesting, to say the least, but what it does show is how heavily the sun god’s Marc Rowan is investing in the UK. 

Apollo is also expanding its London pad, moving two offices to a giant one at Soho Place, in what Rowan calls its ‘global financial hub’. Its European team manages a quarter of its £584billion war chest.

In another move, John Wood Group confirmed it was open to more talks with, yes, you have guessed, Apollo. Wood has already rejected four previous offers so any new one would have to top £1.7billion to be accepted.

There are plenty more bids on the table. Network International, the Middle East and African payments group, says it is close to accepting an offer by Francisco Partners and CVC, two more private equity firms.

Veterinary specialist Dechra was approached last week by Swedish private equity firm EQT, while Industrials REIT has given the nod to a takeover by Blackstone of the US. Events company Hyve Group agreed a deal with Providence Equity Partners, another US firm, although some big investors are said to be resisting.

What all these bids have in common is that Britain is being sold on the cheap. So far this year, there have been 14 offers by private equity firms for UK companies. 

Too many have been made vulnerable because of the weaker pound since the Brexit vote in 2016 when sterling was $1.45.

After Brexit, too many investors took flight – a serious and foolish misjudgment – which meant UK companies were left undervalued and priced at a discount, particularly to their European peers. 

Although sterling has recovered from last year’s lows to £1.24, it is still low by historic levels.

More to the point, the UK economy is looking much brighter than even a few months ago. See the confident way in which Chancellor Jeremy Hunt brushed off the IMF’s sombre forecast in Washington last week. 

It is too early to predict strong growth but there are green shoots around and inflation is on its way down.

Foreign predators can see that too, which is why they are in a hurry to buy British assets before they start re-adjusting to more realistic levels and the pound strengthens.

Perversely, you could say it’s a vote of confidence in Britain. Which is why it’s all the more of a tragedy that Britain’s pension funds – and indeed private investors – can’t see the same upside as foreigners.

With their obsession for buying gilts, funds are losing out.

Yet the cards have been there to see for years. The Government and the London Stock Exchange must speed up reforms to encourage pension funds back into the equity market. If domestic investors won’t buy their own shares, then someone else will.

On the run

Yet it’s never too late to do the right thing. The FTSE 100 has now enjoyed several days of gains in a row – the best run since Christmas 2020. 

The index touched the highest it’s been for five weeks but gave up the ghost later on. There is still time to invest before more foreign suitors have picked up all the goodies.

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